Creating a Post-College Financial Plan to Stay Out of Debt

Millennials are finding themselves in unfamiliar territories after completing their college studies and starting the real life of looking for a job, paying bills and definitely paying off huge amounts of debts. The situation can get depressing if you are coming from a situation whereby all your bills were taken care of; and then suddenly you are in this environment where you have monthly student loan repayment, mortgage repayment, car loan repayment and your ever increasing bills as your living standards change when you land your first job. To help you avoid the messy culture shock most millennials are undergoing immediately after college, here are a few tips to guide you to a smoother transition.

college finances

Get yourself a financial mentor

We all have this one person that we consider to be financially successful than ourselves even though we are within the same income levels. These people could be a relative, a family friend or even a workmate in your employment after college. Identify this person and let them be your financial mentors by guiding you in making basic financial decisions such as how much to send on rent, when to borrow a personal loan, how to ask for a higher starting salary, how much to save from your monthly income among many other financial issues. This will help you keep track of your financial habits knowing that you have an accountability partner who is watching your every move and guiding you in the right direction.

Differentiate between wants and needs

College life is always free-flowing with credit cards for most students sometimes linked to their parents’ bank accounts; hence they can afford to spend so much money on luxury stuff. However, the narrative changes once you are out of college and you are living on your own with your own bills to pay from your salary. In most cases, deductions such as income taxes, health insurance, pension contribution, student loan repayment among others may leave you with half your monthly gross salary in the bank account.

Knowing the things to prioritize in your expenditures becomes very important since you also need to save part of your monthly income for future investments. Cutting down on luxuries that you were used to when in college and focusing on the basics that you need to live a decent life becomes a necessity at this stage in your life. Living within your means does not hurt; never try to compete with your friends in living fancy lives that are unsustainable. This kind of peer pressure will only inflate your credit card loans and dig you deeper into the debt zone.

Plan to pay yourself first!

By paying yourself first I mean you need to have a savings plan where you deposit at least 30% of your monthly salary before you make any other expenditure and lock it in. This will help you to build a pool of funds that you can easily tap into in case of emergencies when a lucrative investment opportunity surfaces or when you want to buy your first car without getting a loan. In addition, this is a perfect way to start saving for your retirement early. By capitalizing on the power of compounding, your savings will grow to larger amounts if you start saving early as compared to when you start saving late as you near your retirement age. You can choose to go with the 401 (k) or the IRA plan; but whichever channel of savings you choose, ensure you are disciplined to make regular deposits on a monthly basis.


Figure out your budget and stick to it

It is often said that failing to plan is planning to fail. You do not want to fail especially when it comes to financial matters since that can lead you into the deep dark hole of debt. To ensure you live within your means and have your expenditure regulated, you need to create your monthly personal budget which outlines your needs and their corresponding costs as well as your revenue sources and the regular incomes they bring in every month. You should then compare your total monthly costs with your total monthly incomes to see how you are faring. If your monthly expenditure exceeds your monthly regular income, then you are having a budget deficit and you will have to cut down on some of the items on your expenditure list so as to avoid borrowing loans to meet bridge the gap. However, if your monthly income is more than your monthly expenses, then you have a budget surplus which is highly recommended that you add it to your monthly savings plan.

Having a personal financial plan is one thing while implementing and sticking by it is a whole different scenario. It calls for high personal discipline to create your budget and live by it. But if you feel you might get off the right track, having a financial mentor will keep you from wandering away from financial prudence into the rat race of debt repayment.

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